SCHEDULE II (See Section 123 ) USEFUL LIVES TO COMPUTE DEPRECIATION |
Notified Date of Section: 01/04/2014 |
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PART ‘A’
1. Depreciation is the systematic allocation of the
depreciable amount of an asset over its useful life. The
depreciable amount of an asset is the cost of an asset or
other amount substituted for cost, less its residual value.
The useful life of an asset is the period over which an
asset is expected to be available for use by an entity, or
the number of production or similar units expected to be
obtained from the asset by the entity.
1
&
4
[(i) The useful life of an asset shall not ondinarily be
different from the useful life specified in Part C and the
residual value of an asset shall not be more than five per
cent. of the original cost of the asset:
7["(ii) For intangible assests, the relevant Indian Accounting Standards (Ind AS) shall apply. Where a compmany is not required to comply with the Indian Accounting Standrads (Ind AS), it shall comply with relevant Accounting Standrads under Companies (Accounting Standards) Rules, 2006."], except in case of intangible assets (Toll Roads) created under ‘Build, Operate and Transfer’, ‘Build, Own, Operate and Transfer’ or any other form of public private partnership route in case of road projects. Amortisation in such cases may be done as follows:- (a) Mode of amortisation
Amortisation Amount =
(b) Meaning of particulars are as follows :-
The amortisation amount or rate should ensure that the whole of the cost of the intangible asset is amortised over the concession period. Revenue shall be reviewed at the end of each financial year and projected revenue shall be adjusted to reflect such changes, if any, in the estimates as will lead to the actual collection at the end of the concession period. (c) Example:-
Assuming that the Total revenue to be generated out of Intangible Assets over the period would be Rs. 600 Crores, in the following manner:-
‘*’ will be actual at the end of financial year. Based on this the charge for first year would be Rs. 4.16 Crore (approximately) (i.e. Rs. 5/Rs. 600 x Rs. 500 Crores) which would be charged to profit and loss and 0.83% (i.e. Rs. 4.16 Crore/ Rs. 500 Crore x 100) is the amortisation rate for the first year. Where a company arrives at the amortisation amount in respect of the said Intangible Assets in accordance with any method as per the applicable Accounting Standards, it shall disclose the same.]
PART ‘B’
PART ‘C’
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Notes.—
1. "Factory buildings" does not include offices, godowns, staff quarters.
2. Where, during any financial year, any addition has been made to any
asset, or where any asset has been sold, discarded, demolished or
destroyed, the depreciation on such assets shall be calculated on a pro
rata basis from the date of such addition or, as the case may be, up to the
date on which such asset has been sold, discarded,demolished or destroyed.
3. The following information shall also be disclosed in the accounts,
namely:—
(i) depreciation methods used; and
(ii) the useful lives of the assets for computing depreciation, if they are
different from the life specified in the Schedule.
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[4(a) Useful life specified in part C of the schedule is for whole of the
asset and where cost of a part of the asset is significant to total cost of
the asset and useful life of that part is different from the useful life of
the remaining asset, useful life of that significant part shall be
determined separately.
(b) The requirement under sub-paragraph (a) shall be voluntary in respect
of the financial year commencing on or after the 1st April, 2014 and
mandatory for financial statements in respect of financial years commencing
on or after the 1st April, 2015]
3
[5. Depreciable amount is the cost of an asset, or other amount substituted
for cost, less its residual value. Ordinarily, the residual value of an
asset is often in significant but it should generally be not more than 5%
of the original cost of the asset.]
6. The useful lives of assets working on shift basis have been specified in
the Schedule based on their single shift working. Except for assets in
respect of which no extra shift depreciation is permitted (indicated by
NESD in Part C above), if an asset is used for any time during the year for
double shift, the depreciation will increase by 50% for that period and in
case of the triple shift the depreciation shall be calculated on the basis
of 100% for that period.
7. From the date this Schedule comes into effect, the carrying amount of
the asset as on that date—
(a) shall be depreciated over the remaining useful life of the asset as per
this Schedule;
(b) after retaining the residual value, 6[may be
recognized] in the opening balance of retained earnings where the remaining
useful life of an asset is nil.
8. ‘‘Continuous process plant’’ means a plant which is required and
designed to operate for twenty-four hours a day.
Amendments
1.
Substituted by Notification Dated 31st March, 2014
-
Original Content
(Superseded & Substituted - Refer Notification Dated- 29 August,2014)
2. Substituted by Notification Dated 31st March, 2014
In PART C, in Para 5, in item IV, in sub-item (i), for clause (b)
"(b) continuous process plant for which no special rate has been prescribed under (ii) below [NESD] - 8 years."
the following clause shall be substituted namely:-
"(b) continuous process plant for which no special rate has been prescribed under (ii) below [NESD] - 25 years."
3. Omitted by Notification Dated 31st March, 2014.
4. Substituted by Notification Dated 29,August, 2014.
In part 'A', in paragraph 3, for sub-paragraph (1),
"The useful life of an asset shall not be longer then the useful life specified in part 'C' and the residual value of an asset shall not be more than five percent of the original cost of the asset :
Provided that where a company uses a useful life or residual value of the asset which is different from the above limits, justification for the difference shall be disclosed in its financial statement."
the following sub-paragraph shall be substituted namely:-
"The useful life of an asset shall not ondinarily be different from the
useful life specified in Part C and the residual value of an asset shall
not be more than five per cent. of the original cost of the asset:
Provided that where a company adopts a useful life different from what is
specified in Part C or uses a residual value different from the limit
specified above, the financial statements shall disclose such difference
and provide justification in this behalf duly supported by technical
advice".
5. Substituted by Notification Dated 29,August, 2014.
After Part C, for paragraph (4),
"4 Useful life specified in part C of the schedule is for whole of the
asset.Where cost of a part of the asset is significant to total cost of the
asset and useful life of that part is different from the useful life of the
remaining asset, useful life of that significant part shall be determined
separately."
the following paragraph shall be substituted namely:-
"4(a) Useful life specified in part C of the schedule is for whole of the
asset and where cost of a part of the asset is significant to total cost of
the asset and useful life of that part is different from the useful life of
the remaining asset, useful life of that significant part shall be
determined separately.
(b) The requirement under sub-paragraph (a) shall be voluntary in respect
of the financial year commencing on or after the 1st April, 2014 and
mandatory for financial statements in respect of financial years commencing
on or after the 1st April, 2015".
6. Substituted by Notification Dated 29th ,August, 2014.
In paragraph 7,in sub-paragraph (b) for the words "shall be recognized", the words "may be reconized" shall be substituted.
7. Substituted by Notification Dated 17th, November, 2016.
In Schedule II, under Part- A in para-3, in sub - paragraph (ii) for brackets, letters and words
"(ii) For intangible assets, the provisions of the accounting standards applicable for the time being in force shall apply"
the following shall be substituted,
["(ii) For intangible assests, the relevant Indian Accounting Standards (Ind AS) shall apply. Where a compmany is not required to comply with the Indian Accounting Standrads (Ind AS), it shall comply with relevant Accounting Standrads under Companies (Accounting Standards) Rules, 2006."],